Running a successful business is about much more than coming up with a good product or service. It also involves having to make some difficult decisions about how to protect the business without compromising it.

For example, let’s imagine you are the owner of a medium-sized Atlanta business. You have a considerable number of employees working for you and you are at a point where you are seeing steady increases in profits. In this scenario, one protection you may want to consider utilizing is an arbitration clause in your contracts.

Arbitration clauses are clauses that specify arbitration as the chosen method of resolving disputes that arise between the parties signing contract. This could be a contract between a company and its business partners, consumers or employers.

Benefits of arbitration clauses

There are many benefits to having an arbitration clause from the perspective of a business owner. To begin with, it eliminates (or at least minimizes) the option for litigating a dispute. This can save a business a considerable amount of time, money and effort.

It can also serve as means of keeping sensitive information confidential. Because these hearings take place outside of open court, it is easier to keep information private.

Arbitration is also less formal than a court case without being as informal as mediation. It falls somewhere in the middle, which can be attractive to people who want a fair and final resolution without having to go through the intimidating court system.

Drawbacks of arbitration clauses

Of course, there are drawbacks to consider when it comes to arbitration clauses. In regards to consumer contracts, you could wind up facing considerable public scrutiny in the event that consumers feel duped or tricked into agreeing to an arbitration clause. Last year, for instance, General Mills ended up striking a forced arbitration clause from its legal terms in response to outrage by people who unknowingly agreed to such terms by using coupons or entering contests.

Arbitration clauses can also negatively impact employment agreements. Employers should be prepared to lose potential job candidates who do not agree to arbitration, or be willing to negotiate that and other terms of an agreement in order to keep a candidate put off by the arbitration clause.

Deciding whether arbitration clauses are right for you depends on many elements unique to your company and its needs. Before you make any snap judgments about arbitration or other forms of dispute resolution, it would be wise to consult an experienced attorney.